A stark indicator of the way things are moving in the UK comes from the latest annual survey of members by the National Association of Pension Funds. In the past 12 months, 46 funds have closed final salary schemes to new entrants. This is exactly 10% of funds responding to this part of the survey.
This is the classic first step in the restructuring of arrangements and is usually followed by the establishment of a scheme on a defined contribution (DC) basis. According to the survey, 13 schemes switched to a money purchase DC scheme, seven to a group personal pension plan (GPP), with a further 12 schemes adding a DC section or scheme and seven adding a GPP.
According to the survey, the employers’ average contribution to a DC scheme where members also contributed was 6% per annum under contributory schemes, with 51% of the schemes having a contribution in the range of 5–10%. The average contribution rate for defined benefit schemes was 9.2%, with 31% of employers paying in the band 10–15%.
As far as the arrival of ‘stakeholder pension plans’ this autumn, as a low-cost DC plan, 24% of plans surveyed say they intend to introduce these schemes to supplement their existing offering, while 10% said they already had and 52% said they were not going to. But only 6% of schemes said they had had or were going to introduce stakeholder plans to replace their existing occupational arrangements. Nearly 90% said they did not intend to replace existing schemes with stakeholders.
Altogether 31% felt that a range of pressures facing the industry would mean further moves from DB to defined contribution, including stakeholder, though only 193 responded to this question. But of more concern were the issues of increasing complexity and the requirements for more resources, which 39% saw as having an impact on pensions.
Another pressure on plans is clearly the arrival of FRS17, the new accounting standard that has to be implemented by 2003 by quoted companies and will have the effect of reflecting changes in pension fund values in sponsoring companies’ accounts. Altogether, 77% of the 456 schemes responding said that FRS17 would make offering DB plans less attractive to employers, while 20% said it would make no difference. Nearly two thirds of sponsors expect to have implemented the standard by 2002.
The survey had responses from 496 NAPF members, covering 857 funds in both the public and private sectors, with combined assets of nearly £700bn (e1,130bn). Of the funds in the private sector, 563 were final salary, 182 were defined contribution and 31 were hybrid schemes. The number of active members in private schemes toyalled 1.683m and in the public sector 2.647m, pensioner figures were respectively 2.058m and 1.928m.

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